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Capitalist Economy |Meaning, Features, Advantage, and Disadvantage

Capitalist Economy


Market Economy (Capitalist Economy)

    Market economy is the type of economics in which all credit goes to people's views and decisions without any control of government and state. Market economy is also known as free-market economy or capitalist economy. Market economy resolves the problem of consumers through the interaction between demand and supply. In market economy, there is a division of labour to produce quality goods and services.  In the market, most industries, and firms are handled by private owners or organizations to make profit and profit motives.  The main feature of a capitalist economy is all the people are free to produce goods and services according to their choice. A capitalist economy rotates around the consumers because producers produce only those goods which are demanded by consumers. In other, word the consumers are the sovereign in a capitalist economy. Many basic problems are solved by the capitalist economy like; unemployment, poverty, cast, inequality.
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According to N.G. Mankiw, "Market economy is an economy that allocates resources through the decentralized decision of many firms and households as they  interact in market for goods and services."

According to P.A Samuelsom, " Market ecoonmy is the economy in which the what, how and for whom questions concering resources allocation are primarily determined by supply and demand in market."  
Features of Capitalist Economy System
      The main features of the Capitalist economic system are mentioned below;
i. Private property: The main feature of the capitalist economic system is private poverty. All the productive resources such as land, factories, mines, etc. have come under private ownership. The owner has the right to, control, and dispose of the means of production.
ii. Economic freedom: As you know that in a capitalist economy, there is no control of the government, which means that all the producers, consumers, and suppliers have free to produce goods and services according to the demand.

iii. Limited role of government: Since the capitalist economic means of private ownership. There is a high role of private ownership and a limited role of government to maintain the law and order and to develop infrastructure to encourage the private sectors.

iv. Profit motive: In the capitalist economy, all the private ownership desire to earn profit and it is the most important to all the ownership. The producers produce those goods or services to make a higher profit. In profit motives, how to produce and for whom to produce are taken on the basis of profit and not on the basis of social welfare is the main aim of the producer.

v. Consumers' sovereignty: In a capitalist economy system consumers are compared as kings. All the demands and services work according to the consumers. Good and services will be produced for customers. Producers produce goods and services according to consumers' demand, in this condition producer gets a higher profit and it is also related to the profit motive for the producer. 
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